Market Basket CEO canned

By Christopher Scott, cscott@lowellsun.com

Posted:
06/24/2014 06:59:18 AM EDT

Then-Market Basket CEO Arthur T. Demoulas is greeted by supporters as he arrives at the Wyndham Hotel in Andover last July for a board of directors meeting, where he was rumored to face termination. The board on Monday voted to fire him and two other longtime company officials. Watch video on these stories at lowellsun.com. SUN file photo / David H. Brow

LOWELL -- One year after Demoulas Super Markets Inc. CEO Arthur T. Demoulas lost majority support on the board of directors to his estranged cousin, Arthur S. Demoulas, the board on Monday morning fired the chief executive.

Arthur T. Demoulas, who took control of the company in 2008, had increased the number of its Market Basket grocery stores by 15 to 71, while annual sales topped $4 billion and the number of employees grew to more than 20,000.

The board, The Sun has learned, also fired Bill Marsden, Market Basket's operations director, and Joseph Rockwell, vice president of grocery sales and merchandising.

A receptionist at the company's headquarters on East Street in Tewksbury told a Sun reporter there would be no public comment before asking the reporter to leave.

Arthur T. Demoulas at a Sun meeting last August.
(Robert Whitaker)

Customers were not shy. Dozens shopping at various Market Basket stores were outraged at the news, as Demoulas' persona has grown for his kind treatment of customers and employees.

Social media was also alive on Demoulas' behalf, particularly on Twitter and the "Save Market Basket" Facebook page.

The board has seven members. They are Terry Carleton and Bill Shea, who support Arthur T. Arthur S. is also a board member, and Gerard Levins, another board member, is also a Arthur S. supporter. Independent members are Ron Weiner, Eric Gebaide and Keith Cowan.

According to the board of directors' website, www.dsmboardinfo.com, a 1998 Massachusetts Supreme Judicial Court ruling reconstituted ownership of the company to have 50.

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5 percent the shares held by "A shareholders" (the three surviving children of the late George Demoulas, and the widow and family of a son of George Demoulas) and 49.5 percent of the shares held by "B shareholders" (the four children of Telemachus "Mike" Demoulas).

Arthur T. is a son of Telemachus; Arthur S. is a son of George.

The three independent directors, also called "A/B" directors, are elected annually by a plurality vote of the shares and qualify as "disinterested, independent directors" in accordance with standards published by the New York Stock Exchange.

The Sun's attempts to reach all directors either by email and telephone were unsuccessful.

The board, which met Monday at Ropes & Gray, LLP, in Boston, released the following statement:

"The Board of Directors of Demoulas Super Markets Inc. today announced that it held elections for company officers at its meeting this morning. The Board has elected Felicia Thornton and James Gooch, both experienced retail and grocery executives who recently have been serving as consultants to the company, to assume the senior management responsibilities of Market Basket, effective immediately. They have become Market Basket's chief operating officer and chief administrative officer, respectively, and co-chief executive officers of the company.

"Arthur T. Demoulas, who was not re-elected president and will not retain any management responsibilities moving forward, remains a shareholder of the company," the statement added.

The statement also said the board re-elected Don Mulligan as vice president, chief financial officer and treasurer, and Jim Miamis as vice president of Market Basket.

But Rockwell was not re-elected vice president and is no longer with the company. Marsden, former director of operations, is also no longer with the company.

"The board believes this new management team will enable Market Basket to maximize its potential and pave the way for continued success in the future," the statement added.

Andrea Batchelder, a lawyer with the Lowell law firm of Gallagher & Cavanaugh who has represented Arthur T., declined to comment at this time and referred inquiries to his publicity firm, Rasky Baerlien Strategic Communications, Inc. The firm released a statement by Marsden Monday afternoon:

"The Board's action today is driven by greed, pure and simple. Arthur T. Demoulas continued the tradition of his father, promising customers 'More for Your Dollar.' He was fired today after he built the most successful supermarket chain in the Northeast, one of the top in the country by most metrics. He is as committed to his customers as he is to his employees, his vendors, service providers and the communities in which we serve. He implemented a 4 percent across-the-board price cut for 2014 at a time when people needed it. In reaction, some board members threatened his job and litigation, so concerned were they that this would cut into the company's profit.

"Along with Arthur T. Demoulas, I was also fired as was Joe Rockwell, vice president of grocery. Combined we have more than 110 years of service to the company. Our crime was our commitment to Arthur T. Demoulas, the employees and the promise to customers to always honor the Market Basket commitment to high quality and value."

The Market Basket regional empire was created from a single store in Lowell's Acre neighborhood nearly 100 years ago. It was the brainchild of Greek immigrants Arthur "Athanasios" Demoulas and Efrosini Demoulas.

The store was especially popular among the city's Greek residents, who would buy lamb freshly slaughtered at the family's farm in Dracut each morning.

In 1954, Athanasios and Efrosini sold the store to two of their sons, George and Telemachus, and they expanded it into the modern supermarket model.

But when George died in 1971 of a heart attack, the Demoulas family fractured into two groups revolving around a son of each brother.

Telemachus Demoulas died in 2003.

Monday's vote may seem like a surprise, but tension between the board and its CEO have been growing for at least a year, and the Demoulas family feud dates back to at least the mid-1990s.

In April, Arthur T. Demoulas strongly criticized the company's board of directors and potential changes to the grocery chain's popular profit-sharing plan. He has also sharply denounced other actions of the board -- his bosses -- since a change in majority control last June.

"Given the deplorable track record of the new board since its inception in June 2013," Demoulas said, "you are naive if you think our associates and the plan participants are going to believe that this board is acting in their best interest by making the wholesale changes to their plan that you propose."

The profit-sharing plan, previously overseen by a board of trustees, is now in the hands of a new investment committee. Among the changes, Demoulas said, may be individualized investment options instead of the one-size-fits-all plan now in place that Demoulas said illustrates the company's philosophy.

"You think investment choice is good," he said. "I think it is divisive and breaks down unity in this company. It will no longer be, 'how did we do this year?' but be instead, 'how did you do?' "

A few months earlier, in December, Arthur T. Demoulas ripped a website set up by the board to offer news about the board and the company. The company should speak to its employees through the CEO, he said, not through the board's website.

Soon after the board swing, it held an all-day meeting at the Wyndham Hotel in Andover on a sweltering day in July 2013.

Many thought there would be a mutiny that day. But as the board met inside, hundreds of supporters of Arthur T. gathered outside the hotel to rally support for the CEO.

In a statement released through the company, Demoulas said he was "pleased" with the result and hoped to work "constructively" with the board.

But despite a successful run for the 71-store chain, three of the company's nine family shareholders sued that June, alleging Arthur T. Demoulas made improper business deals with companies run by his wife and brothers-in-law and withheld information from board members.

Demoulas was The Sun's 2013 "Man of the Year," for his many contributions and influence, both of which he showed in actions, not words. In a rare public interview at the company's headquarters, he reiterated several times his view of how the industry works.

"We're in the people business first and the food business second," said Demoulas. "If we get the first part right, we're 80 percent there."

He added: "My goal is to have customers feeling better when they leave one of our stores than when they came in."

Soon afterward, Demoulas announced that for the remainder of this year, Market Basket would give shoppers a 4 percent discount on their purchases, a promotion company officials say is designed to thank existing customers and welcome new ones into the store.

In an interview with The Sun, Demoulas said the 4 percent price-cut complements the company's "More for your Dollar" slogan.

"The customer needs the savings more than the company needs the extra profits," said Demoulas.

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